Crypto Winter – What should investors do?
Until now, crypto investors have had a very bad year. The global market cap of these digital assets has fallen below $1 trillion, and almost every coin’s price has dropped more than 50% from all-time highs, with no immediate recovery in sight amid the ongoing bear market.
While the Terra (LUNA) debacle last month was the first major blow to crypto investors’ hopes, brewing problems at large crypto lenders, exchanges, and companies are threatening a much larger collapse.
Starting with Bitcoin and Ethereum, all major cryptocurrencies are struggling to rise as selling activity in most of these tokens has increased in recent weeks. Those who have not yet invested in cryptocurrency may be better off staying away. However, for those who have already invested in cryptocurrency, industry experts recommend a number of steps to take.
So, what should investors do now?
1. Stay away from spot trading
The volatile market and sell-off trend are expected to continue. Experts suggest that it may be wise for retail investors to stay away from spot trading for a while.
“Crypto winter chills have forced even bitcoin miners to sell their holdings. Market volatility will be around for some time, and sell-offs can’t be ruled out. Long-term investors can explore crypto products such as crypto fixed deposits and Crypto SIPs. Retail investors should stay away from spot trading,” said Sharat Chandra, Sharat Chandra, VP, Research and Strategy at blockchain-based identity management platform EarthID.
2. Save for better times
Investors must opt for more risk-averse approaches. Johnny Lyu, CEO of crypto exchange KuCoin, said investors should also be wary of discounted selloffs, as short-term market rebounds can be signals of an impending greater collapse.
“Such market conditions make it clear that many projects, including large ones, will not survive to see a rebound or even a correction. As such, the best approach is the wait-and-see one that bears little risk and safeguards available capital for better times,” said Johnny.
3. Do more research
Investors must reevaluate their existing strategies and identify new opportunities. It is always advisable for investors to keep researching to find opportunities that may yield good returns if the markets recover.
“One should read more about different crypto coins, and their movement and learn from the experts to make informed investment decisions before buying any coin, and stay wary of impulse buying,” said Prashant Kumar, founder and CEO of Bengaluru-based crypto startup weTrade.
4. Don’t invest more than your disposal income
Crypto is a high-risk, high-reward game. So you should invest only that amount you can afford to lose. Experts say retail investors should only use their disposable income and have the patience to run through various phases before plunging in, just like any other investment.’
Crypto winter is a part of the assets’ market cycle and nothing new that one should fear. “Yes, we are in a crypto winter but it is not as dramatic as people are claiming it to be. With adoption heavily increasing and regulations being made, this was more or less expected to happen,” said Jeetu Kataria, CEO of Dubai-based crypto trading platform DIFX.
Some experts even think that the crypto winter may augur well for the industry, especially in India.
“We believe that crypto winter will form a more stable base for the crypto ecosystem in India. Projects with actual use cases of token will thrive once the Indian crypto ecosystem emerges stronger,” Vineet Budki, Managing Partner at Cypher Capital, a blockchain-focussed VC.
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